JIT liquidity
JIT liquidity is the practice of adding and removing liquidity around a trade in AMMs to capture fees with minimal exposure to price risk.
In AMMs that support concentrated liquidity, sophisticated actors can detect incoming order flow and briefly provide liquidity at the execution price, earning fees and withdrawing quickly after.
"A liquidity provider adds liquidity just before a large swap and removes it right after, capturing fees without long-term inventory risk."
"JIT strategies often appear alongside MEV techniques like priority gas auctions."
JIT liquidity can reduce fee revenue for passive LPs and affect price impact for traders. Protocols counter with anti-sniping mechanisms, minimum position durations, or fee tiers.
"Minimum active time windows or cooldowns discourage opportunistic JIT provisioning."
"Dynamic fees that rise during volatile periods can redistribute value toward longer-term LPs."
Related Terms
Decentralized Exchange
→A decentralized exchange (DEX) is a platform that allows users to trade digital assets directly with each other, without the need for an intermediary, such as a brokerage or bank.
Front-Running
→Executing a trade or transaction in anticipation of a known pending order to gain advantage; in crypto, often via observing the public mempool.
Impermanent loss
→Impermanent loss is the loss LPs experience when providing liquidity to AMMs compared to holding assets, due to price divergence from the deposit ratio.
Flash Loan
→An uncollateralized on-chain loan that must be borrowed and repaid within a single transaction, enabled by composable DeFi.
All terms and definitions may update as the Cryptionary improves.
